Phil & Dawn's Nebraska Hay Farm: $1.35M Tax Deferred via DST

Phil and Dawn had worked their whole lives on their Nebraska hay farm. When retirement came into view, they wanted to sell the land, simplify their lives, and create steady income.

The two offers on the table

Seller financing offer: $6 million spread across years
Cash offer: $5.7 million at closing

On the surface, $6M sounds better. The math told a different story.

The tax problem

A straight $5.7M cash sale would have generated roughly $1.35M in immediate capital gains, depreciation recapture, and state taxes. Net to Phil and Dawn after taxes: about $4.65M in equity.

Seller financing would have spread the tax over years but generated the same total tax bill, and added buyer-default risk.

The strategy

Phil and Dawn took the $5.7M cash sale and executed a 1031 exchange into a Delaware Statutory Trust (DST), investing across multifamily, self-storage, and senior housing properties.

The outcome

By using a 1031 DST instead of paying tax upfront:

Deferred every dollar of their $1.35M tax liability
Kept the full $5.7M working in institutional real estate
Structured for the potential of monthly mailbox money for retirement, not guaranteed, varies by sponsor, property, and market
The deferred-tax math meant more of their original equity stayed at work compared to either a straight cash sale or seller financing

The legacy structure

Their estate plan was set up so that heirs would inherit separate DST units without conflict. With a step-up in basis at death, the deferred taxes would be wiped out permanently. Each heir gets their own share, no shared decision-making, no family fights over who runs the place.

Real names and exact numbers were not used. The concept reflected here is illustrative. Potential income, tax benefits, and appreciation are not guaranteed and may vary. DST 1031 properties are available only to accredited investors. Investments involve risk including loss of principal.